India to Boost Russian Oil Buys Despite US Tariffs, Kpler Says
Overview
India's appetite for Russian crude oil is set to remain robust in January, with imports projected at 1.3 million barrels per day, according to Kpler. This resilience persists despite proposed U.S. sanctions imposing substantial tariffs. While intermediaries are facilitating trade, potential escalation could increase India's import bill by up to $11 billion and fuel inflation.
India Defies US Sanctions, Russian Crude Imports to Rise in January
India's substantial appetite for Russian crude oil is poised to continue in January, with import levels expected to reach 1.3 million barrels per day. This projection comes from global data provider Kpler, even as the United States considers imposing significant tariffs on countries purchasing Russian oil.
Competitive Pricing Drives Demand
Russian crude remains a compelling option for Indian refiners due to significant price discounts. The spread against competing Middle Eastern grades is currently between $8-10 per barrel. This attractive differential is key to maintaining import volumes, despite geopolitical risks. Sumit Ritolia, Lead Research Analyst at Kpler, noted that credible tariffs would shift risk calculations but not cause immediate shortages.
Intermediaries Facilitate Trade
Following new U.S. sanctions in December that impacted direct purchases from major Russian oil firms like Rosneft and Lukoil, trade has shifted to a network of intermediaries. Companies such as Tatneft, Redwood Global Supply, and Morexport are now facilitating these transactions. This shift means Russian barrels will continue to enter India, albeit through less transparent channels, as long as broader secondary sanctions are avoided.
Economic Implications of Sanctions
Should Russian crude become inaccessible, Kpler estimates India's annual crude import bill could rise by $9-11 billion. This increase is based on a conservative $5 per barrel differential loss on estimated displaced volumes. Such a rise in input costs could strain fiscal balances and potentially push retail fuel inflation higher, especially if the government intervenes to manage price hikes.
Refining Fit and Future Outlook
Indian refineries are equipped to process Russian crude, and its blend compatibility is a significant factor. While alternative supplies from the Middle East, West Africa, and the Americas are available, they often come at a higher cost. Kpler expects imports to gradually re-normalize from January, with Russian crude remaining a structurally embedded part of India's energy slate, balanced by diversification from traditional suppliers like Saudi Arabia and Iraq, and incremental volumes from the U.S. and Atlantic Basin.
